{"id":675,"date":"2016-04-29T10:55:19","date_gmt":"2016-04-29T10:55:19","guid":{"rendered":"http:\/\/renovateme.co.uk\/blog\/?p=675"},"modified":"2018-09-07T19:27:24","modified_gmt":"2018-09-07T19:27:24","slug":"disposing-main-home-part-1","status":"publish","type":"post","link":"https:\/\/renovateme.co.uk\/blog\/disposing-main-home-part-1\/","title":{"rendered":"Disposing of your main home \u2013 Part 1"},"content":{"rendered":"

\"disposing<\/a><\/p>\n

Many people would naturally assume that a sale of their main home is free of capital gains tax. There are however a number of potential traps for the unwary, particularly where a property has large grounds or a number of properties are owned at the same time.\u00a0 Part one of our guide to main residence relief explores some of the rules to bear in mind.<\/p>\n

Should a gain arise on the disposal of residential property, this gain will be subject to capital gains tax (\u201cCGT\u201d) at 18% or 28% depending on the taxpayer\u2019s marginal income tax rate (the recently reduced CGT rates of 10% and 20% introduced in the March 2016 Budget do not apply to the disposal of residential property). \u00a0The annual exemption, if available, would reduce the taxable gain and is \u00a311,100 per individual for 2016\/17.<\/p>\n

However, upon the disposal of an individual\u2019s only or main residence, principal private residence relief (\u201cPPR\u201d) may be available to exempt all or part of any gain arising. However, should a loss arise on the disposal of a main residence, which qualifies for PPR, it is not allowable for tax purposes and cannot be offset against other gains.<\/p>\n

Qualifying property<\/strong><\/p>\n

PPR is available on the disposal of a dwelling house which includes the main property and any relevant adjoining buildings such as garages, outhouses or separate buildings. The current legislation provides that gardens and grounds of up to half a hectare also qualify for relief, however, it may be possible for a larger area to qualify if it can be shown the land is required for the reasonable enjoyment of the property.<\/p>\n

The property may be located in the UK or elsewhere, however with effect from 6 April 2015 a residence will only qualify if the individual and their spouse\/civil partner are resident in the country where the residence is located or if not, they meet the day count test. For UK based property, residency is determined with reference to the Statutory Residence Test and the day count test means at least 90 days in a tax year is spent at the property.<\/p>\n

More than one residence<\/strong><\/p>\n

At any one time, an individual and their spouse\/civil partner may have only one residential property which they are \u201coccupying\u201d as their main residence for PPR relief. Where more than one residential property is owned, and both are occupied as a residence then an election may be made to nominate which of the properties is the \u2018main\u2019 residence for PPR purposes.\u00a0 This election must be made within two years of the date the individual first started to have more than one residence and once made it can be varied should this be required.<\/p>\n

If an election is not correctly made then HMRC will determine the individual\u2019s factual main residence for the purposes of PPR based on the facts and circumstances. Some examples of what HMRC will consider include which residence the individual and their family spend most of their time, which residence is used for important correspondence and the location of the registered family dentist and doctor.<\/p>\n

Periods of absence <\/strong><\/p>\n

For PPR, occupation means both \u201cactual occupation<\/em>\u201d, which is where the individual is physically present in the property and \u201cdeemed occupation<\/em>\u201d, which is where the individual is not physically present in the property but for the purposes of PPR they are treated as occupying the property.<\/p>\n

The different types of deemed occupation are outlined below:<\/p>\n